Energy procurement: Should companies keep it in-house or use a professional consultant?

Every business can benefit from engaging a professional energy consultant.
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Gareth Ball
Gareth Ball

Energy procurement: Should companies keep it in-house or use a professional consultant?

The short answer is that every business can benefit from engaging a professional energy consultant, and the savings are just one major selling point. Consultants remove all the headaches involved in procurement and tendering, leaving a company’s key staff to get on with core business.

The long answer is that there are many factors involved and companies may wish to consider these before coming to a final decision. With that in mind, here are a few points to think about when deciding between outsourcing to energy professionals and in-house energy procurement.

Tracking a volatile market

The energy market is unpredictable. Like any commodity, energy prices are constantly changing and subject to the basic rules of supply and demand. In Australia, the situation is particularly complex due to factors such as the lack of consistent policy across the states, the disparate nature of our network, the ongoing shift towards renewables, and the move away from coal. There has also been a fair amount of political push and pull around the energy market and climate policy.

What is less unpredictable, though, is that despite fluctuations, energy prices in Australia increased substantially over the last 20 years. According to a 2018 Grattan Institute study, high electricity prices are a given.

Fast forward to 2021 and things are looking better thanks to lower input fuel costs and the increased generation of renewables. Still, despite a December 2020 Australian Energy Market Commission (AEMC) report predicting wholesale costs will continue to fall in 2022 and 2023, award-winning research and ratings firm Fitch Ratings notes that energy retailers should have an easier time of things in 2023 as prices may “partially recover.”

In the past ten years, we’ve seen record highs and lows, and this volatility is a challenge to companies’ procurement strategies. Suffice it to say, tracking the energy market and keeping one’s finger on the pulse of prices and the ever-changing landscape can easily turn into a full-time job, and it is for some people (including us here at SES).

A solid energy procurement strategy is informed by in-depth knowledge of the market’s past, its political context, and the ways energy providers work. Then, with a true understanding of these aspects ticked off, smart procurement is also about understanding the market’s potential future movements, changes, and upcoming disruptions. Good energy consultants proactively secure tenders and ensure that a company’s energy spend remains as steady as possible, even years down the line.

The devil is in the details

Breaking down the parts of an energy retailer’s offer is tricky, and while reading and understanding one tender is hard enough, comparing and contrasting it to others verges on excruciating because providers adopt varied styles and strategies when presenting offers. The task is daunting, to say the least.

Medium to large businesses without the budget for procurement staff may be tempted to turn to comparison platforms, however these platforms lack the complexity for this market.

As with many things in life, the devil is in the details. Tenders contain numerous line items, and each needs to be properly examined and analysed within the context of a business’ needs and usage. Professional consultants can help you cut through the noise and get the most out of tenders by reviewing and contrasting line items. But it’s not just these that matter, delving into the details of an offer’s terms and conditions is key to cutting energy spending and avoiding common procurement pitfalls.

Companies can either hire a dedicated energy procurement manager to do the same task or let the responsibility fall on their CFOs or supply chain managers. But as imagined, there are downfalls to both strategies.

Once a company’s energy strategy is on track, do they need an ongoing in-house procurement manager? For many businesses, this can become a redundant commitment, not to mention an expensive one. But letting the responsibility fall on CFOs and supply chain managers draws their attention away from other tasks and duties, including more pressing matters. Plus, poring over tenders and terms is time-consuming. While most CFOs are capable of managing the bottom line, most are not experts in the energy sector.

In most cases, hiring a dedicated energy expert to sort through the details, offers, and complex terms and conditions is a better option for companies. Without a specialised and dedicated team of energy experts on the job, companies can be left behind because they’re not aware of what’s happening in the market.

SES acts as the energy procurement arm of your business, ensuring clients get the best possible deals and avoid the complexities involved in tendering.

The benefits of a consolidated approach

Companies benefit from a consolidated approach to their energy strategy, which is what energy consultants such as SES offer. The alternative is a fragmented approach that involves juggling several separate stakeholders; using one company for brokering, another for data management, and another for solar and so on is expensive and can lead to breakdowns in communication.

SES assists clients on every step of the journey, consolidating their energy strategies so procurement is streamlined and the company can reap the rewards. Businesses who want to use a professional consultant for their procurement needs should look for certain things:

● Independence and neutrality

● Transparency

● Honesty

● Integrity

SES maintains strict rules around these four points and always works hard for our clients. We know that a happy customer who makes great savings on energy and trusts our consultants is a loyal client. Our business relies on long term relationships and helping our clients to take control of their energy cost.

Ongoing account support and a dedicated account manager on the job

When a company outsources its energy management, it gains more than lower bills. It also gains a dedicated professional who stays on the job for the company, and ongoing support when it comes to any changes in accounts. The immediate benefits are easy to see as a good consultant will work hard to customise their services to each business’ needs and avoid a universal approach, which results in both short and long-term savings.

In many ways, having a dedicated professional handling your company’s energy procurement is much like having a dedicated procurement manager on staff — they are always on hand to help the business navigate the complexities of the market and stay on top of any changes. With a consultant on the job, there’s no need to hire a full-time staff member to handle tendering, which results in even more savings, and as the consultant is always looking for opportunities to cut spending, they can identify solutions beyond procurement.

If you have an electricity or gas contract due for renewal soon, contact us.

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